An Interest Exclusive Part 36 Offer Is Not A Part 36 Offer

All inclusive

Can a Part 36 Offer which excludes interest be validly made either generally or in the context of proceedings?

It has been an issue on which a number of judges have held diverging views.

In the present case, on a first appeal His Honour Judge Dight CBE, upholding Deputy Master Campbell’s first instance decision, had concluded that an offer exclusive of interest cannot be a valid Part 36 offer.

In contrast, in a matter we reported in May, Horne v Prescot (No 1) Ltd [2019] EWHC 1322 (QB), Nicol J, dismissing an appeal from Master Nagalingam, held that, at least in the context of detailed assessment proceedings, an offer excluding interest can be an effective Part 36 offer.

So, what is the answer?

Agreeing with Deputy Master Campbell and HHJ Dight CBE, the Court of Appeal has now ruled that a Part 36 Offer which purports to exclude interest either generally or in the context of detailed assessment proceedings is not a valid Part 36 Offer.

“Part 36 proceeds on the basis that interest is ancillary to a claim, not a severable part of it. Just as a party cannot make a Part 36 offer providing for costs consequences other than those prescribed by Part 36, so a Part 36 offer must, if it offers to pay or accept a sum of money, be inclusive of all interest, as CPR 36.5(4) says. Interest cannot be hived off. True it is that, on occasion, there may be room for substantial dispute as regards interest and that the amount at stake could be large, but the same could be said about costs.”

 KING V CITY OF LONDON CORPORATION [2019] EWCA CIV 2266